There is a huge difference between basic performance measurement and outstanding organizational performance. Basic performance measurement refers to probably the current level of performance measurement in your organization.
You still use the traditional criteria for evaluating performance measurement and everything looks pretty good to you or the organization has a Balanced Scorecard, perhaps even a technology-enabled one, and committed boffins well-trained in financial and non-financial enterprise performance measurement.
In today’s competitive marketplace, your organization needs to progress from basic performance measurement to outstanding enterprise performance. High performance or outstanding performance measurement organizations have the following characteristics:
- Measurement is relevant, practical and understandable.
- Measurement is streamlined, more usable and less troublesome.
- Mundane tasks of measurement are automated and people clearly understand what the numbers embody.
- Everyone is involved in performance measurement from the lowest level to the highest level of the organization.
- All employees have scorecards and clear line of sight between their own scorecards and the measures of the larger functional units and know how their own measures relate to each next set of measures.
- There is open discussion of performance measurement within teams and among functions to discuss current measurements, develop action plans, review measurement frameworks and consider performance improvement issues.
- New measures appear on scorecards to complement or replace outdated measures to drive internal and external innovation.
- Measurement focuses on improvement and learning. Everyone is educated about measurement on an on-going basis.
If your organization is still experiencing basic performance measurement, all hope is not lost. There is still room to improve and progress far beyond this level. In order to achieve excellent results, the following four keys are crucial for the positive transformation to take place:
- Context: This refers to the performance measurement environment created by the organization. A positive environment is important for achieving improved results. In your organization, how is performance measurement perceived by employees and how do they respond emotionally to it? How performance measurement is used in an organization determines how people will respond. For example, measurement is experienced much differently when used to inspect, control, report or manipulate compared to being used to provide feedback, to learn and to improve. Create an environment where people are energized about measurement as opposed to just complying.
- Focus: It is vital to select the right measures. Measuring the right things result in taking right courses of action and improved results. The problem with most organizations still experiencing basic performance measurement is that they are focusing on too many or dull measures which eventually weakens performance measurement. Measuring too many measures has the tendency of making everything seem important. The truth is when everything is important then nothing is really important because the organization has very little focus and performance measurement has very little power. In today’s competitive marketplace, organizations need to have very clear focus and do things better and better. They must focus on the critical few transformational measures that will make a real difference to competitive advantage and differentiate the organization from its competitors.
- Integration: As powerful as individual measures are, they can be poorly used if they are not integrated onto a larger measurement framework that shows the relationship between each measure and the other important measures and how they combine to create value for the organization. Focusing on individual functional measures causes sub optimization and tends to build functional silos that focus entirely on their own self-serving measures. Measurement is about trade-offs and balances. The cause-and-effect relationship between measures, especially between drivers and outcomes, must be understood. This will help the organization confidently predict the necessary actions for creating optimal value for the organization and its stakeholders. Measures must be aligned with strategy and then integrated across the entire organization, or disintegration will occur.
- Interactivity: Measurement isn’t primarily about calculations, data collection or analysis. It is about continuous interactions that occur throughout the organization at each stage of the process, leading to new insights about what to measure and how to measure it. It is much more of a social process. The developing, validating and aligning of measurement frameworks requires a deep understanding of the business model, strategy and operational constraints that can only occur with a strong social organization.
Closing Thoughts: For any organization to achieve excellent results, it is essential that all four keys work in tandem with each other. For example, without the right focus, the other keys will be futile.